List of Important Direct Tax Sections

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LIST OF IMPORTANT SECTIONS

 

IMPORTANT DEFINITIONS & BASIC CONCEPTS

 

Sections Provisions
2(31) Person
3 P.Y.
2(9) A.Y.
2(7) Assessee
2(24) Income
2(45) Total Income

 

RESIDENTIAL STATUS

 

Sections Provisions
2(26) Indian Company
2(30) NR – Individual
5(1) Incidence of tax on R/ROR/RNOR
5(2) Incidence of tax on NR
6(2) HUF/Firm/AOP/BOI-R/S
6(3) Company – R/S
6(4) Other persons (Local authority/Artificial juridical person etc.) – R/S
6(6)(a) RNOR – Individual
6(6)(b) RNOR – HUF
115C Person of Indian origin

 

RESIDENTIAL STATUS

 

Sections Provisions
22 Basic of charge (i.e. Changing Section)
Exp. to Sec 23(1) Unrealised rent
24(a) Statutory deduction
24(b) Interest on borrowed capital
25(A) & 25AA Recovery of unrealized rent
25B Arrears of rent received i.e. outstanding rent received
26 Property owned by Co-owners
27(i) Deemed ownership – Transfer to spouse /minor child
27(ii) Deemed ownership – Holder of an impartible estate
27(iii) Deemed ownership – Member of co-operative society etc.
27(iiia) Deemed ownership – Person in possession of property as per Section 53A of TP Act
27(iiib) Deemed ownership – Person having right in a property for a period not less than 12 years

 

 

 

INCOME FROM SALARIES

 

Sections Provisions
9(1) Salary will be deemed to accrue or arise at a place where services are rendered.
10(7) Exemption – Perquisite/allowances received outside India by an employee who is citizen of India + Government employee + renders services outside India.
15 Basis of charge (i.e. Charging Section)
17(1)(ii) Annuity
10(10)(i) Exemption – Gratuity received by employees of Govt./Local Authorities
10(10)(ii) Exemption – Gratuity received by employees covered under Payment of Gratuity Act, 1972.
10(10)(iii) Exemption – Gratuity received by other employees.
10(10)AA)(ii) Exemption – Encashment of leave salary at the time of retirement by other employees (including employees of Local Authorities and Public sector Undertakings)
10(10B) Exemption – Retrenchment compensation
10(10C) & Rule 2BA Exemption – VRS (Golden Handshake Scheme)
10(13A) & Rule 2A Exemption – HRA
10(14) & Rule 2BB Exemption – Special allowances
16 (ii) Deduction for Entertainment Allowance
16 (iii) Deduction for Professional Tax
17(2)(i) & Rule 3(1) Value of rent free accommodation provided by the employer
17(2)(ii) & Rule 3(1) Value of rent-free accommodation provided at concessional rate
17(2)(iii) The value of any benefit provided free of cost or concessional rate to Specified employees
17(2)(iii) & Rule 3(2) Valuation of motor car/other vehicles
17(2)(iii) & Rule 3(3) Value of benefit from service of a sweeper, a gardener, a watchman or personal attendant
17(2)(iii) & Rule 3(4) Value of benefit resulting from supply of gas, electricity or water
17(2)(iii) & Rule 3(5) Value of free/concessional education facilities
17(2)(iii) & Rule 3(6) Valuation of perquisite in respect of free transport or private journey provided by an undertaking engaged in carrying of passengers or goods to any employee(or to any member of his household)
17(2)(iv) Employee’s obligation met by the employer
17(2)(v) Value LIP/Deferred Annuity Premium paid/payable by the employer
17(2)(vi) the value of any specified security or sweat equity shares allotted or transferred, by the employer, or former employer, free of cost or at concessional rate to the employee
17(2)(vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds Rs. 1,00,000
17(2)(viii) & Rule 3(7) Value of any other fringe benefit
17(2)(viii) & Rule 3(7)(i) Value of interest free loan/concessional loan
17(2)(viii) & Rule 3(7)(ii) Value of travelling, touring, accommodation and any other expenses paid or reimbursed by the employer for any holiday availed of by the employee
17(2)(viii) & Rule 3(7)(iii) Value of free food and non-alcoholic beverages
17(2)(viii) & Rule 3(7)(iv) Value of any gift, voucher or token
17(2)(viii) & Rule 3(7)(v) Value of expenses on credit card
17(2)(viii) & Rule 3(7)(vi) Value of club membership and expenses incurred in a club
17(2)(viii) & Rule 3(7)(vii) Value of use of movable assets
17(2)(viii) & Rule 3(7)(viii) Value of transfer of any moveable asset
Rule 3(7)(ix) Valuation of other perquisites, benefits, amenities etc.
10(5) & Rule 2B Exemption – Leave Travel Concession/Assistance (LTC)
17(3) Profits in lieu of salary

 

CAPITAL GAINS

 

Sections Provisions
45(1) Basis of charge (i.e. Charging Section)
2(14) Meaning of capital asset
2(42A) Short-term capital asset
2(29A) Long-term capital asset
2(42B) Short-term capital gain
2(29B) Long-term capital gain
2(47) Definition of transfer
48 Method of computation of capital gain
First Proviso to Section 48 Computation of capital gain from transfer of shares or debentures of Indian company held by a NR assessee and purchased in foreign currency
Rule 115A Method of conversion
Second Proviso to Section 48 Indexation
55 Cost of acquisition
47 Certain transactions not regarded as transfer
49(1) Cost with reference to certain modes of acquisition
49(2AA) Where the capital gain arises from the transfer of specified security or sweat equity shares referred to in Section 17(2)(vi), the COA of such security or shares shall be the FMV which has been taken into account for the purposes of the said Section 17(2)(vi)
49(4) Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under Section 56(2)(vii), the COA of such property shall be deemed to be the value which has been taken into account for the purposes said Section 56(2)(vii).
2(42A) Period of holding
55 Cost of improvement
50C Adoption of stamp duty for transfer of land or building or both
111A STCG on transfer of equity shares or units of equity-oriented mutual fund taxable @ 15%
112 Tax on LTCG @ 20%
Proviso to Section 112 In case of listed securities or units (units may be listed or unlisted) or zero coupon bonds, Tax on LTCG shall be lower of the following:(a) 20% of LTCG after Indexation(b) 10% of LTCG before Indexation
51 Advance money forfeited
45(1A) CG shall not be taxable in the year in which the asset is destroyed but shall be taxable in the year in which money is received from the insurance company
45(2) CG arising from the transfer (conversion) of a capital asset into stock-in-trade shall be charged to tax in the P.Y. in which stock-in-trade is sold or otherwise transferred
45(2A) CG from transfer of securities held in DEMAT form shall be taxable as the income of beneficial owner in the P.Y. in which transfer took place.
45(3) Where a partner of a firm transfers an asset to the firm by way of capital contribution or normal sale, CG shall be chargeable to tax in the P.Y. in which transfer took place
45(4) CG arising from the transfer of a capital asset by way of distribution of capital asset to partners on dissolution or “otherwise”
45(5) Where a capital asset is compulsorily acquired under any law or where the consideration for transfer of capital asset is to be determined or approved by the Central Government/RBI
145A(b) Interest received on original/enhanced compensation shall be deemed to be the income of the year in which it is received, irrespective of the method of accounting followed by the assessee
56(2)(viii) Interest received on original/enhanced compensation is taxable under the head “IOS”.
57(iv) In case of Interest received on original/enhanced compensation, a deduction of a sum equal to 50% of such income shall be allowed.
54 Exemption – Residential house property
54B Exemption – Agricultural land
54D Exemption – Land or building compulsorily acquired by the Government
54EC Exemption – Any capital asset
54F Exemption – Any long-term capital asset other than residential H.P.
54G Exemption – Land, building, plant or machinery in order to shift an industrial undertaking from urban area to rural area
54GA Exemption – Land, building, plant or machinery in order to shift an industrial undertaking from urban area to any special economic zone.
10(33) Exemption – US, 1964
10(37) Exemption – Urban agricultural land compulsorily acquired by Government
10(38) Exemption – Equity shares or units of an equity oriented fund.

 

INCOME FROM OTHER SOURCES

 

Sections Provisions
56(1) Basis of charge (i.e. Charging Section)
145 Method of accounting
8 Basis of charge of dividend income
56(2) Specific incomes chargeable under the head IOS
57 Deduction of expenses from specific incomes chargeable under the head IOS
58 Amount not deductible in computing the income under the head IOS
59 Deemed income chargeable under the head IOS
115BB Special rate of income-tax in case of Winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever
56(2)(vii) Income to include gift of money and or property
56(2)(viia) Income to include transfer of shares in case of recipient firms and companies

 

 

DEDUCTIONS FROM GROSS TOTAL INCOME

 

Sections Provisions
80C Deduction in respect of LIP, contribution to P.F. etc.
80CCC Deduction in respect of LIP, contribution to P.F. etc.
80CCD Deduction in respect of contribution to pension scheme of Central Government
80CCE Aggregate amount of deduction under Sections 80C, 80CCC and 80CCD cannot exceed Rs. 1,00,000
80D Deductions in respect of medical insurance premium
80DD Deduction in respect of maintenance including medical treatment of a dependent being person with disability
80DDB Deduction in respect of medical treatment, etc.
80E Deduction in respect of the repayment of loan taken for higher education.
80G Deduction in respect of donations to certain funds, charitable institutions etc.
80GG Deduction in respect of rent paid
80GGB Deduction in respect of contributions given by Indian companies to political parties.
80GGC Deduction in respect of contributions given by any person to political parties.
80JJA Deduction in respect of profits and gains from the business of collecting and processing of bio-degradable waste.
80U Deduction in case of a person with disability

 

 

 

 

 

PROFITS & GAINS FROM BUSINESS OF PROFESSION

 

Sections Provisions
28 Basis of charge (i.e. Charging Section)
43(5) Speculative transaction
Explanation 2 to Section 28 Where the speculative transactions carried on by an assessee are of such a nature as to constitute a business, such business (i.e. “Speculation business”) shall be deemed to be distinct and separate from any other busieness.
29 PGBP – How computed?
43(2) For the purposes of Section 28 to 43, the word “paid” mean “actually paid” or “incurred” according to the method of accounting upon the basis of which income is computed under the head PGBP.
145 Method of accounting
30 Rent, rates, taxes, repairs and insurance for buildings
31 Repairs and insurance of machinery, plant & furniture
32 Depreciation
2(11) Block of Assets
50 Special provision for computing CG in case of depreciable assets
38(2) Disallowance in respect of assets used both for business and personal purposes
32(2) Unabsorbed depreciation
35D Amortization of preliminary expenses
35DD Amortization of expenditure in case of amalgamation or demerger
35DDA Amortization of expenses incurred under VRS
35 Expenditure on scientific research
35(2AA) Contribution to National Laboratory etc
35(2AB) Expenditure on in-house research and development facility
35A Expenditure on acquisition of Patent Rights or Copyrights
35AB Expenditure on Know-how
36 Other Deductions
36(1)(ix) Any revenue expense bonafide incurred by a company for the purposes of promoting family planning amongst the employees
36(1)(va) Any sum received by assessee from any of his employees as contribution to any fund for welfare of employees is deductible provided such sum is credited by the assessee to employee’ account in the relevant fund on or before due date
37(1) General Clause for deduction
37(2B) Expenses on advertisement in any souvenir, brochure, tract, pamphlet or the
40 Amount specifically not deductible
40A(2) Where the assessee incurs any expenditure in respect of which payment has been made to certain specified person, the A.O. may disallow so much of the expenditure as he considers to be excessive or unreasonable
40A(3) Where any expenditure is incurred in a sum exceeding Rs. 20,000/- and payment is made otherwise than by an account payee cheque or account bank draft, 100% of such expenditure shall be disallowed
40A(3A) Where an allowance has been made in the
Rule 6DD No disallowance under Section 40A(3) shall be made if payment is made otherwise than by an account payee cheque or bank draft in cases referred in Rule 6DD
43B Certain deduction on actual payment basis
36(1)(vii) Bad Debts
41(4) Bad Debt Recovery
41(1) Recovery of loss or expenditure allowed as deduction & Remission and cessation of the trading liability
35AD Deduction in respect of capital expenditure of certain specified business, e.g., Setting up and operating a Cold Chain Facility
Section 2(29BA) Definition of manufacture

 

CLUBBING OF INCOME

 

Sections Provisions
60 Transfer of income when there is not transfer of asset
61 Revocable transfer of asset
62 Transfer of asset which is not revocable during the life time of the beneficiary/transferee
63 Meaning of “revocable transfer”
64(1)(ii) Clubbing of income of spouse
64(1)(iv) Clubbing of income from asset transferred to spouse
64(1)(vi) Clubbing of income from asset transferred to son’s wife for inadequate consideration
64(1)(vii) Clubbing of income from asset transferred for inadequate consideration to any person for the benefit of the spouse
64(1)(vii) Clubbing of income from asset transferred for inadequate consideration to any person on or after 1-04-1973 for the benefit of the son’s wife
64(1A) Clubbing of income of minor child
10(32) Exemption of Rs. 1,500/- for each minor child to the parent whose TI(excluding minor’s income) is greater
64(2) Conversion of self-occupied property into HUF property
288A Rounding off of Total Income
288B Rounding off of tax etc.

 

SET OFF CARRY FORWARD E SET OFF OF LOSSES

 

Sections Provisions
70 Set –off loss from one source against income from other source under the same head of income (i.e. Inter –head adjustment).
71 Set-off of loss from one head against income from other head (i.e.  Inter-head adjustment).
71B C/F&S/O of Loss from House Property.
72 C/F & S/O of losses of non-speculative business.
72A Unabsorbed losses and unabsorbed depreciation of Amalgamating Co./Pvt. Co./Unlisted Public Co. shall be deemed to be the losses and depreciation of Amalgamated Co./LLP of the P.Y in which amalgamation/confession took place.
41(5) “Loss” of business or profession of the P.Y** in which business was discontinued can be S/O against the income U/S 41 (1), 41 (30) and 41 (4) arising subsequent to discontinuance of busses.
41(1) Recovery of loss or expenditure allowed as deduction & Remission and cessation of the trading liability.
41(3) Profit on sale of scientific research asset.
41(4) Bad debt recovery.
Proviso to Section 72 (1) Where business is discontinued due to flood, cyclone, earthquake, riots etc. and reestablished before the expiry of 3 years from the P.Y. in which business discontinued, then loss of such business including the B/F loss can be S/O against non-speculative business income in the A.Y. relevant to the year in which business is re-established and the balance in 7 succeeding A.Y.
73 Losses of Speculation Business.
74 Losses under the head CG.
74A Losses from activity of owning and maintaining of race horses.
80 Return of loss should be filed on or before the due of furnishing of return as prescribed under section 139 (1).
73A S/O, or C/F & S/O of losses by specified business referred to in section 35D.

 

AGRICULTURAL INCOME

 

Sections Provisions
2 (1A) (B) Any rent or revenue derived from land which is situated in India and is used for agricultural purposed.
2 (1A)(b) Any income derived from such land by agricultural operations including processing of the agricultural produce, raised or received as rent-in-kind so as to render it fit for the market, or sale of such produce.
2(1A)(c) Income attributable to a farm house subject to the conditions that the building is situated on or, in the immediate vicinity of the land and is used  as a dwelling house store house other outbuilding and the land is assessed to land revenue or a local rate or, alternatively, the building is situated on or in the immediate vicinity of land which (though not assessed to land revenue or local rate ) is situated out said the urban areas.

 

10(1) Exemption of agricultural income.
Rule 7 Any other case (e.g. sugarcane) :Market value of any agricultural produce, raised by the assessed or received by him as rant-in-kind and utilized as raw material in his business, is deducted.
Rule 7A Income derived from sale of centrifuged latex or cenex or latex based crepes or brown crepes or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants by the seller in India.
Rule 7B Income derived from the coffee grown and cured by the seller in India.
Rule 7B (1A) Income derived from the of coffee grown, cured roasted and grounded by the seller in India, with or without mixing chicory or other flavoring ingredients.
Rule 8 Income from sale of tea grown and manufactured by the assessee in India.

RETURN OF INCOME

                                                         

Section Provisions
139 (1) Company, firm and other person (if total income exceeds maximum amount which is not chargeable to tax)are required to file ROI on before due date.
Expl.2to 139(1) Due date of filing ROL.
Rule 12 Forms for filing ROL.
4th Proviso to 139(1) Individual, HUF, AOP/BOI and Artificial person required to file ROI on or before due date if GTI before claiming deduction under Section 10A, 10B and 10BA exceeds maximum amount not chargeable to tax.
139 (3) Loss return.
80 Notwithstanding anything contained in chapter vi, the loss which has not been determined in pursuance of a return filed in accordance with the provisions of section 139 (3), shall not be allowed to be “carried forward and set off” under section 72, or section 73, or section 74, or section 74A.
139(4) Belated Return.
139(4A) If the Total Income of a charitable or religious trust or institution, before exemption under Section 11 & Section 12, exceeds the maximum amount not chargeable to tax, them the trust or institution is under an obligation to furnish the return of income within the time allowed under section 139(1).
139(4B) If the Total Income of a political party, before exemption under Section 13A exceeds the maximum amount not chargeable to tax, then the political party is under an obligation to furnish the return of income  within the time allowed under Section 139 (1).
139 (5) Revised Return.
139 (9) Defective Return
139B New scheme to facilitate submission of returns through Tax Return Preparers.
139C Power of CBDT to dispense with furnishing of documents
139D Power of CBDT to make rules for filing of return in electronic form
140 Who shall sign the return?

           

 

ASSESSMENT OF FIRMS

 

Sections Provisions
184 Partnership from assessed as such.
144 Best judged Assessment.
10 (2A) The share of the partners in the total income of the firm is exempt in the hands of the partners.
40 (b) Conditions for Allow ability of remuneration and interest paid by firm to its partners.

MISEELLANEOUS

Sections Provisions
2 (48) Definition of zero coupon Bond.
2 (36A) Meaning of Public Sector Company.
36 (1) (iiia) Tax treatment in the hands of company issuing zero coupon Bonds.
Rule  8B Guidelines for ZCB issued by central Government.
32 (1) (iia) Additional Depreciation.
2 (42c) Definition of slump sale
50B Special provision for computation of Capital Gain in case of slump sale.
43(6)(c)(i)(C) Reduction of WDV of the transferor’s total assets, in case of slump sale.
44AA Compulsory maintenance of books of accounts.
44AB Compulsory Tax Audit
44AD Presumptive Taxation : Any business except the business of plying, hiring or lasing goods carriages to in section 44AE
44AE Presumptive Taxation : Business of plying, hiring or leasing goods carriages
10(2) The share of profit of the members in the total income of the HUF is exempt in the hands of the members.
10(26AAA) Exemption to Sikkimese.
80-IB(10) Deduction to an undertaking engaged in developing and billowing housing projects.
10(43) Sum received (either in lump sum or in installments) under a reverse mortgage scheme is exempt in the hands of the borrower.
10(35) Like section 10(34) (which exempts dividend received from domestic companies), section 10(35) exempts income received on units of UTI and Mutual covered under section 10(23D).

 

 

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8 thoughts on “List of Important Direct Tax Sections”

  5. I am a Non Resident Expatriate working in Saudi Arabia for more than 13 years and having NRE account with a leading bank in India. All my earnings in Saudi Arabia are transferred from my local bank account to India NRE account.

    I came to know from friends that Non Resident Expatriates who worked overseas more than 9 years can keep their nre rupee account open and operate for another two years after they return to India for good.

    Is this true ? Is there any notification by RBI or Income Tax department of India published ?

    Could you please clarify this and provide the proof for that.

    Thanks.

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